This webinar is designed to help you master the fundamental concepts of the TUPE Information and Consultation requirements and risks.
It is a back to basics session focusing on these Information & Consultation obligations. This is one of the most intricate areas where the regulations must be applied on the ground and in real time.
It is a perfect introduction to the TUPE Information & Consultation process or for those wanting to understand the risks and implications for an effective TUPE transfer, while avoiding liabilities for the organisation.
The webinar covers the basics of the Information and Consultation process in both a business sale and outsourcing situation. We look at:
- Sharing / obtaining employee information
- Identifying any "measures"
- Effectively managing the TUPE Information and Consultation process
- Avoiding liabilities
Our speakers, Rebecca Jones and Jasmine Coyne will help you understand the practical issues and how to protect your organisation from liabilities arising from the TUPE Information and Consultation
Transcript
Siobhan Bishop: Good morning everyone. Welcome to our TUPE club webinar today. This is a back to basics session and we are focusing in the key issue of information and consultation. I am Siobhan Bishop, a principal associate in the employment, labour and equalities team here at Gowling WLG and am joined today by Rebecca Jones who is a principal associate in our team and Jasmine Coyne, an associate with us.
So we are also joined by KJ Clarke who is here to help with any technical issues that may arise and so if you have any questions on that, please contact her through the "chat" button on the webinar.
So today as I said, it is a back to basics session. We are going to drill down and focus on this one key area of information and consultation because that is really key to ensuring that we have a smooth transfer and to avoid some key liabilities.
So here is the agenda for today. First of all, Rebecca will look at the key issues for preparing and planning and why that is such an important stage before the process even begins. Jasmine will drill down into the actual detail on sharing and obtaining employee information and they will look at measures and how you can identify them and what that actually means if you have identified any measures. The actual process, looking at the legal and practical aspects of managing that process and, finally looking at avoiding liabilities because this really is an expensive area if there is a claim.
So as you can see we have got a full agenda today. It is going to be quite a lot to get through and we are going to focus on that rather than having any questions and answers at the end, but there will be a full recording of this webinar plus the slides and a transcript on the website for you to refer back to after the webinar.
So I just want to have a quick word about the definitions we are going to use for anyone who is new to TUPE as this is a back to basics session so the information consultation process will apply to both business sale and to an outstanding situation or a service provision change and for the parties that are involved, the employers that are involved, we are going to refer to them as transferor and transferee so the transferor is effectively the existing employer, the employer before the TUPE transfer happens and that sometimes is for the outgoing employer because they are effectively replaced by the new employer and that is going to be transferee so the transferee is a new employer who is taking over the employees and they are also sometimes called the income employer so I hope that clears that terminology up for us. I am going to hand over straightaway now to Rebecca to deal with the preparation and planning on the process.
Rebecca Jones: Thank you Siobhan. Well the focus of our session today as Siobhan has just said is going to be on the information and consultation process so what is it, when does it apply, what are the requirements and how can you make sure that it runs smoothly and we will answer each of those questions as we go through the webinar this morning, but before we get stuck into that, if there is one message that I really want you to take away from today it is that planning and preparation is key so the better your planning and preparation, then the smoother we expect the consultation process outcome and when we are talking about planning and preparation, we mean slightly different things depending on whether you are a transferor so that is the outgoing employer or the transferee, which is the new employer. Now for the most part it is the transferor who has the greater responsibility in connection with the duty to inform and consult and Jasmine is going to come on to explain requirements for that process and what it looks like in practice a little bit later on, but before we get to that we are going to have a quick look at some of the initial preparatory steps that need to be taken to make sure that the process runs as smoothly as possible so there are two preliminary steps that need to be taken by the parties to prepare for the consultation process, and if you can bear with me, I am going to work backwards for a moment because the first question that we are often asked when an employer is ready to start planning TUPE consultation is basically how much time should we allow, and spoiler alert but you are going to find out from Jasmine later in the session that the answer is that is depends on the measures which are envisaged.
In short the duty to consult under TUPE is triggered where the transferor or the transferee envisage taking measures which will affect the employees in connection with the transfer and the transferor must ensure that adequate time has been to allow consultation about those measures, sorry Jasmine, I hope I did not steel too much of your thunder there.
We are going to take a look at the concept of measures in a bit of detail shortly but before we look at measures we need to take another step backwards because from a transferee's perspective they are going to need to know all about the employees who are coming across and the arrangements that apply to them so that they can identify what is anything might change for the employees and therefore what are the measures that they envisage so in a moment, I will hand over to Jasmine and she is going to have a look at the arrangements for sharing employee information and then once we have done that, we will then move on to look at identifying measures before we then take a closer look at the nuts and bolts of the consultation process, and before we move on to that, I just have one more slide I wanted to share with you while we are on the subject of preparation and planning and here it is. So the slide sets out what I see as the four key pillars to effective preparation and planning for a TUPE consultation process. So the first pillar there is to understand the obligations under TUPE so again who do you need to consult, what about, how when and that is essentially the legal bit which Jasmine is going to come on to look at a little bit later and I promise I swill try and avoid any further spoilers on that Jasmine and then the second and third pillars which are at the bottom of the diagram there are what I consider the practical steps for the transferor to carry out and the first of those is to prepare a timeline setting out the steps that it will take and an outline of the meetings that is plans to hold as it goes through the consultation process. Now of course the transferor can draw up a rough timeline for the process early on but it does need to make sure that it reviews that once details of the measures are known to make sure that adequate time for consultation has been factored in.
And in the bottom right-hand corner, alongside the timeline is the need to prepare a pack of documents that are going to be needed at each stage of the consultation process. So again, Jasmine will talk through the essential documents that we want to see but we are basically talking about things like scripting in an initial briefing to employees, preparing an information letter about the transfer and it is a good idea to get a Q&A ready that can be updated throughout the process.
And then the final pillar in the top right-hand corner, I have just included a note about communicating with the transferee so the extent to which the transferee is involved in the process is going to depend very much on the nature of the transfer but where there is a working relationship between the parties, having that open communication will generally make for a smoother transfer and consultation process and I think that leads us neatly into the next topic so I will hand over to Jasmine who is going to take a look at sharing and obtaining of employee information.
Jasmine: Thanks Rebecca and good morning everyone. Hopefully, as you know TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006, and it is that protection of employment that is key and the Regulations seek to do in a number of ways and as part of TUPE, when a TUPE transfer takes place, employees transfer on their existing terms and conditions and to make sure there are no surprises in the transfer and to allow the consultation to run effectively, regulation 11 of TUPE aims to smooth out that process. Regulation 11 places an obligation on the outgoing employer, the transferor, to provide certain information about the transferring employees to the incoming employer, the transferee.
We plan to touch on that regulatory obligation in more detail. We will also look at how employee information sharing might operate in practice in a business sale or in an outsourcing situation and as ever, we will consider what we need to be mindful of from a GDPR perspective as well.
Under Regulation 11 the obligation is on the transferor to provide employee liability information to the transferee to help the transferee understand what they will inherit in terms of the number of people; the profile of the people; what basic terms and conditions they are on. I am not going to read out all of the particular categories of information on the slide, but they are set out there and you can see more detail in Regulation 11 of TUPE.
However, what you can see is that complying with regulation 11 does require a degree of organisation and co‑ordination by the transferor to pull that information together to pass on, at the appropriate time, to the transferee. You might be able to pull it together in an hour for one person but where there are multiple people and often in business sales there can be tens of people and sometimes hundreds it does present a logistical challenge.
Generally, in our experience, some HR departments are excellent at capturing that information, if they do a lot of TUPE work and some, if TUPE is a less regular occurrence, it can take some time to pull that together and to make sure that you are getting the right information.
If this information is not readily at HR's fingertips. As soon as you become that aware that a TUPE transfer is likely, from a practical perspective it is worth starting to gather that information if you are the transferor on a business sale or if you are the transferor because you are outsourcing a service. Or in the case of a retender situation where the employees are employed by the contractor, reminding the contractor that they need to pull together this information to be compliant with TUPE. Once you have that information it will then be easier to update so that it is accurate at the time you need to share it.
So what do you have to do with this information? Well, you have to give it to the transferee at least 28 days before the transfer takes place, or the date you expect it to take place. That is Employee Liability Information under requirement under TUPE
As I just said, TUPE requires that the information be sent at least 28 days before the transfer but there are two particular problems with the requirement. The first is a timing point so when you start planning your outsourcing or the business sales and purchases we tend to do that in most cases many months before the transfer takes place. That means if you are looking at a large scale workforce move or large scale retender, providing the information 28 days before the transfer takes place is going to be too late to help potential bidders understand their costs and their pricing.
The second problem is the limited categories of information provided under regulation 11. Yes you get basic contract terms and whether there are any grievances or claims to note but ELI information does not cover whether the employees have enhanced redundancy protection and, if the transferee is looking to reduce the headcount post transfer that type of information could be very significant and something that the transferee would need to factor into their pricing. Also Regulation 11 ELI information does not cover, for example, if the employees have valid restrictive covenants in place, does not cover non-contractual benefits, full information about pensions or administrative information and that the transferee will ultimately need to honour post transfer.
This shows that ELI information under TUPE is missing what could be crucial information following a TUPE transfer. And often that information is provided too late to be useful. ELI information itself can be considered too little too late for many deals.
Also this is significant for transferees because the transferee needs to identify which measures it will be taking in respect of transferring employees, it is therefore helpful for transferees to have more comprehensive information about the employees and have it earlier in order to consider and identify its measures.
That is where we quite often see the regulation 11 requirement supplemented by contractual provisions. Requiring the transferor to provide more information, earlier in the process. For instance , a customer in an outsourcing scenario, when they agree the contract in anticipation of an insourcing or retender down the line will add in additional provisions requiring the incumbent provider to provide information about the employees above and beyond the ELI data to flush out as much information as possible as early as possible. If you are requesting that information contractually, you should ensure your contracts contain a warranty from service providers as to the accuracy of any employee information they provide. We have covered the types of information that we might share and in what circumstances. As we know, when it comes to sharing personal information, the follow up question is always – what about GDPR. We won't dive into this fully but I do want to touch upon it briefly to flag the headline points that businesses need to consider when providing employee information as part of a TUPE transfer.
GDPR does not stop us from sharing information in a TUPE situation but what it does mean is that we have got to focus our minds more on what information is being shared, why it is being shared and how we are going to go about doing that.
There are typically three scenarios that we will likely encounter when it comes to the transfer of personal data in this context. Firstly there is the giving of employee liability information, in line with Regulation 11 of TUPE. Now from a GDPR perspective, if you are in ELI territory, the position is straightforward because providing ELI is a legal requirement under TUPE so as long as we provide the right information to the right person, in the right timescale then you have got a lawful basis for providing the information under GDPR.
The second scenario we have already discussed and this usually where there is either an agreed process or a contractual requirement to provide information which goes beyond the scope of ELI under Regulation 11. On a business sale or outsourcing this is often done months before the anticipated transfer date. Clearly outside the scope of Regulation 11.
And then the third scenario, one we haven't mentioned, is when the transfer has or is about to happen and at that point it is common for detailed payroll HR information and personnel files to be handed over.
Legitimate interest is the most common basis for processing data in this context and in order to rely on that ground it is important to firstly identify the legitimate interest and then also work out why sharing the data is necessary for the purposes of that legitimate interest and then you need to carry out a balancing test to balance the relevant parties' interests against the interests of the data subject before deciding that the balance of interest justifies disclosure of the information.
Where possible though, in particular where you are required to share data months in advance of the transfer as part of a contractual requirement, the easier way to comply with GDPR is to anonymise data where possible as the information then being shared is not personal data.
So that covers the information sharing about transferring employees in a nutshell. I'll hand over to Rebecca for the next section.
Rebecca: Thank you Jasmine. So I mentioned that the duty to inform and consult is triggered where the employer envisages taking measures in connection with the transfer and in this session, we are going to have a closer look at what exactly we mean by measures. So, the first thing that I want to say here is that unhelpfully there is no definition under TUPE to help us to identify what a measure is and that means that we need to look at case law and the message that comes out loud and clear from the tribunals is that measures is given a very wider interpretation. In fact, it is going to cover any action, step or arrangement taken in connection with the transfer. We will have a look at some of the common measures that we see in a moment but before we come on to that, I just wanted to say that because measures has such a wide meaning, it is important for an employer to carry out a detailed assessment of current arrangements so that it can identify its potential measures.
Now Jasmine has talked through the process for sharing employee information and the extent of the information that might be provided depending on the nature of the transfer and that is going to be essential to lay the groundwork for the exercise that the transferee will need to carry out to identify its measures so once the transferee has that employee information it needs to review it carefully to identify the measures and we would recommend that as well as looking at the more obvious things like terms and conditions of employment and plans for any redundancy or restructuring. The transferee should also look at things like discretionary benefits and working practices to make sure it identifies anything which will need to change in connection with the transfer. The one point to note on that of course is when drawing up measures plans, the employer does need to bear in mind the extent to which TUPE might prohibit it from implementing measures that it would otherwise like to take. So for example the transferee cannot simply decide that it is going to harmonise terms and conditions because those changes would be void under TUPE.
In a moment, I will run through some of the examples of the common measures that we see but before I get on to that, there are just two points that I wanted to pick up on what is meant by envisaging so I mentioned on the last slide that an employer must inform and consult about measures which it envisages taking but what exactly does that mean? Well this has been considered in case law and it is held that envisages simply means visualises or foresees so in short, the employer must have some definitive plan or proposal in mind and hopes and possibilities will not be measures.
Now as I said we would always recommend that a transferee carries out a thorough assessment of existing employment terms and discretionary benefits and other working practices to identify its potential measures so that those measures can then be communicated to the employees and generally being clear about measures at this stage is likely to lead to a smoother transfer process and also importantly better employee relations in the long run. Interestingly however there is no positive obligation under TUPE for an employer to carry out such an exercise or to take reasonable care to try and identify measures and that is obviously not to say that a transferee can simply bury its head in the sand and the employer does have a duty of care not make misleading statements but there is no duty to proactively try and identify the measures.
So that is an overview of what measures are and also what we mean by envisages. On this slide there are a couple of other principles that I just wanted to look at and then we will move on and we will have a look at some of the different types of measures that we commonly see. So the first point here is that measures does not include changes which are simply a consequence of the transfer and that principle comes from the case of Baxter and M&S where the EAT, the Employment Appeal Tribunal drew a distinction between measures to be taken as a result of the transfer and those which will be taken anyway. The background to this case was that M&S had outsourced its profit protection activity to a third party security provider which resulted in around 100 members of staff transferring to Securicor under TUPE and the claim was brought there on the basis that their work was refocused from internal theft to external theft. This was a measure which should have been the subject of consultation as part of that transfer. However the Employment Appeal Tribunal found that the refocusing was actually something that was going to happen regardless of the transfer and the reason for that was because M&S wanted its arrest rate to go up so it was something that it was already looking at. Although the timing coincided with the transfer, it was not therefore a measure that required consultation under TUPE and the refocusing there was found to be merely a change of emphasis within the existing job description.
And then moving on to the second bullet point in the same case, the Tribunal also found that changes which are inevitable administrative consequences of the transfer are not measures. The point here was that after the transfer a member of staff was asked to contact M&S's internal profit protection managements to determine how to deal with a situation of possible internal theft before they went ahead and took any action and that was different to how things would work before because beforehand the individual would have dealt with the issue and then informs management and it was found that the new procedural step for dealing with internal investigations was not a measure in connection with the transfer but what the Tribunal called an inevitable administrative consequence of a transfer so the EAT drew a distinction there between matters of principle for which consultation was necessary and how those principles were worked out in practice in particular circumstances after the transfer and I think that is something that is particularly worth bearing in mind in an outsourcing scenario or at least an initial outsourcing scenario and that is because it is often likely to be relevant where the outsourced service is then going to integrate in a new way with the client's functions.
And the final point that I wanted to mention on this slide is there is no detriment test for determining measures so regardless of whether a change might have a positive impact on the employees it is still something that needs to be notified. Having said that obviously where the transfer will result in positive changes then the transferee is going to want to give that good news message anyway but just wanted to add the note there that it is also a measures obligation.
So that is a walk through the key principles regarding measures. On this slide, we are going to have a look at some of the measures that we commonly see and I have broken them down to five categories. So the first category there is changes to terms and conditions of employment. Now as a I said, I would add a word of caution here because TUPE imposes restrictions on change in terms of employment which means that changes by reason of the transfer will be void and so that is an area where advice should be taken if it is something that an employer is looking at. That said it is an area where we often see employers wanting to make change and certainly where changes are more administrative so things like changing the payroll date or changing the holiday year then that is something that can generally achieved with a little bit of caution.
The second category then is discretionary benefits so under TUPE the new employer inherits the same discretion as the outgoing employer when it comes to make changes to discretionary benefits and so this is an area where there is more flexibility and another note of caution of course is that the incoming employer might need to consider whether a benefit has become contractual by custom and practice and it also needs to think about the employee relations aspect so going in and simply discontinuing any existing discretionary benefits is not really going to get the new employment relationship off to a good start, but it does mean that the new employer certainly has flexibility to replace outgoing employer's discretionary benefits offering with its own and the important point to note there is that such a move would still be a measure so while the transferee inherits the discretion if it is exercising that discretion and it is doing so because of the transfer then it is important that it does notify the outgoing employer of its plans.
While we are on the topic of discretionary benefits, it is just worth a note on bonus arrangements so the starting point with bonus arrangements is to consider the nature of the scheme and the contractual status but what we often see is discretionary schemes which do not necessarily translate well into the new employer's business and in that case, it is common for the new employer to replace existing arrangements with its own, but it will often structure the replacement scheme so that it can tell employees that they will have the same earning potential within the new arrangement.
And the next category that I have got on the list is working practices. So the sort of things that I have got in mind here are things like changes to line management which might be necessary where the new employer is absorbing the transferred workforce into its existing structures and it that scenario, the impact on the line managers obviously needs to be considered separately to that who are being managed and it may well be that there are other measures that need to be notified in respect of the managers themselves.
The next category that we have got is policies and procedures so if the transferred workforce is joining an established business, then the likelihood is that the new employer will want to apply its own policies and procedures rather than continuing those of the outgoing employer and the important point there is to check whether the policies and procedures have contractual status because if that is the case, then further consideration would need to be given for the risks involved but assuming for these purposes that the policies and procedures are discretionary which tends to be the case most often then the transferee is free to make the change but again that is a measure that does need to be notified.
And the final category in the list is perhaps the most significant and that is workforce proposals so if the new employer envisages any restructuring or redundancy then that is a measure which must be notified, and it is obviously quite fundamental which means that more time needs to be factored into the consultancy process. It is worth being aware that in certain circumstances the parties can carry out collective redundancy consultation in advance of the transfer, but we will keep the detail of that for another session.
A final point then on this category is that one thing that we often see is that the new employer envisages that one thing that we often see is that the new employer envisages that some role changes or redundancies will be necessary as it integrates the transferred workforce, but quite often it needs a period of time to review operations after the transfer to decide on the specifics and where that is the case, there is then a question as to whether the new employer's plans are sufficiently developed that it envisages measures in that respect and again I would say that that is an area where careful consideration is needed and there is probably going to be a balancing exercise regarding the obligation to notify measures on the one hand and the risk of unsettling the workforce on the other hand, particularly at a time when there aren't any concrete plans to share.
Something that we do see from time to time is that the new employer will notify its intentions to carry out a review following the transfer as being a measurer albeit being clear that any resulting proposals will be subject to full consultation at the appropriate time.
So let's look at the broad categories of measures. I am not going to go through this slide in detail, but it sets out some of the examples of the measures that we see most frequently many of which we have chatted through on the last slide and the final point that I did want to talk through in this section is a note on terms and benefits which cannot be replicated by the transferee so in practice, this is only really going to occur where a benefit is directly linked to the performance of the employing entity so that is like where they are share schemes or certain types of bonus arrangements and the leading case on this is Mighty Managed Services and French which involved a profit share scheme where the employees could receive a payment either in cash or in shares and the transferee there was simply unable to replicate that arrangement because it could not issue the same shares and the Employment Appeal Tribunal found that instead the employees were entitled to participate in a scheme of substantial equivalence and that equivalence scheme needed to be free from unjust absurd or impossible features. Now we do not have any clear guidance as to what is meant by substantial equivalence. In the strictest sense, that could require that the transferee provides a replacement share scheme enabling the employees to benefit from an award of shares in the employing entity. Alternative, taking a softer approach it could be argued that a replacement component of remuneration so something like access to a cash bonus scheme which gives the employees a similar level of earning potential would fit the bill instead.
It is just worth noting there that this case was unusual because the share scheme was contractual. Generally, we would expect schemes of that nature to be a discretionary benefit and of course where that is the case, the new employer then inherits the same discretion to amend or replace the scheme so it will not always be that this obligation applies.
So that is everything that I wanted to say on measures then. I am going to hand back over to Jasmine now and she is going to take us through the nuts and bolts of the consultation process.
Jasmine: Thank you Rebecca. That is great. We have made it to information consultation now and I have put the headlines on the slide but we'll delve into them in detail. the first thing to understand is that the obligations to inform and consult are distinct obligations so the obligation to inform applies in every TUPE situation where there is a relevant transfer. When there is an anticipated TUPE transfer, employers are required to inform the employee representatives of the fact that the transfer is happening and also provide other information which I will pick up on later. So that is the duty to inform.
Another point on this slide is that the obligation to consult is only mandatory where the employer envisages measures and even if there are no measures and the obligation to consult isn't there under TUPE. Case law still advises us that you still need time in the timetable for voluntary consultation to take place so effectively that means leaving a gap of time once you've informed before you actually go ahead with the transfer, allowing staff via their representatives to raise question on any proposals.
In terms of timing for the consultation, generally there is no specified timetable to do this. What is going to be long enough is going to depend on the extent of the measures proposed and the number of employees affected. Where there are no measures we would normally say two weeks is sufficient. Minor to medium measures something like two or three weeks but for anything more significant, if we are talking restructuring or redundancy then we would expect to see upwards of one month and even towards three.
In terms of who you inform and consult, the requirement is usually to consult appropriate representatives of affected staff, but there is a recent exception to this where it is possible to inform and consult with the staff directly where the employer is small or where a small number of staff are transferring.
The key takeaway is that the duty applies where employees may be affected by the transfer on any measures envisaged. So it is quite obvious that affected staff will include those people who are in scope to transfer under TUPE but it can mean that the transferor needs to consult with representatives of employees who aren't in scope to transfer.
On the next slide, I put what I see as a breakdown of the information consultation process in three stages. Firstly the lead up preparation to the consultation process, the initial communication to affected employees and the appointment of representatives and finally the consultation itself. We will touch on them all but as always, preparation is key for the smooth running of the process so I will focus on that part as well as the TUPE consultation itself. Legally, the majority of the work and process sits with the transferor and the transferee's legal duty when it comes to the information and consultation process is limited to the obligation to provide detail of its measures. Despite that it is helpful when parties cooperate to achieve a smooth transfer and I'll explain how that may play out a little late.
When it comes to preparing them keep in mind always that TUPE requires he employer to inform and consult the affected employees. The first part of that in preparing for a TUPE consultation is to identify which employees are going to be affected by the transfer and in working that out, we need to look at a number of things so firstly we need to the identity functions and services which are going to be subject to the transfer and the employees who are assigned to that relevant business or service so you can easily identify which employees will be in scope to transfer.
With something like an intragroup transfer that might be relatively easy because if you are only transferring employees from one subsidiary company to another, but it might be less clear cut if the business function is being hived off and sold to another company and then you have to determine which employees will be in scope to transfer with the business being sold.
And also don't forget to look out when in TUPE situations and consider early on whether you might need to take further advice or undertake further analysis for example if there were employees who spend the majority but not all of their time supporting the business that is being subject to the transfer, then you will need to give extra thought as to whether those employees are assigned to the business that is transferring.
Once you have identified the affected employees, who are assigned to the business transferring or the service, you should also consider whether there are any employees who are affected by the transfer that are not assigned to the transferring entity so for example, there could be central services employees who support the transferring business as part of their role and although they are not transferring they will still be affected. You need to consider the impact of the transfer and what that impact will have for those employees for example in this case, it could be business proposals that might affect them because if the business in particular is proposing redundancy after the transfer takes place. That is just a reminder that the obligation to consult covers affected employees and not just employees in scope to transfer.
And, as always, I just wanted to mention that it is important that you take care to consider and involve any employees that are absent from the business for example due to family leave or long-term sickness, just to void unnecessary allegations of discrimination when you are carrying out this process.
The next preparatory step which I have put on the slide is to identify measures and Rebecca's covered how me identify measures and it is the transferor that needs to identify the measures that it will take in in respect of its affected employees. The transferee also has a role to play as they must share with the transferor which measures it envisages taking in respect of the affected employees. You've heard a lot on measures, so we will leave it there but I want to turn now to the last preparatory step which is how you consider how will you approach consultation with the affected employees.
TUPE obliges employers to inform and consult predominantly with appropriate representatives of employees who are affected by the transfer. – There is an exception which I will come on to.
Basically, if there is a trade union that is recognised in respect of the affected staff (and they are all in the same bargaining unit), then the trade union is the appropriate representative. However, if there is no trade union or there is a trade union but recognition is only in respect of part of the affected staff group (meaning the bargaining unit does not cover all the affected staff), then the employer has a choice for those staff that are not in the bargaining unit.
They can either consult with staff representatives who are pre‑elected, so there might be an existing staff forum, for example, as long as the purpose for which they were elected is wide enough to capture TUPE (and it will not always be), then that is an option. Or they can choose to invite the staff to elect representatives specifically for this TUPE exercise. That is generally the safer option because you do not need to worry about whether the pre‑elected forum has standing or whether individual members are still within their term of office, for example. However, if you do invite staff to carry out an election then, obviously, there is a knock‑on effect on the timetable for the TUPE transfer because you have to build in time for those elections to be conducted. There is no hard and fast rule regarding the number of representatives. You should just take a common-sense approach to that.
You should also keep in mind that if you are consulting with both groups of employees who will be subject to the transfer and also groups of employees who are affected, but are not in scope to transfer, then this should be factored into the groups from which employee representatives will be drawn. In that scenario, you should also consider whether you will hold a single consultation meeting with all representatives or whether separate meetings should be held with representatives for in-scope and other affected employees.
Final point to pick up from the slide that I need to highlight is that there is a new exception for TUPE transfers as of 1 January 2024, if there are no existing worker representative forum, consultation can take place directly with employees if the either, the employer is a small business with fewer than 50 employees, or the number of people transferring is small, less than 10 employees.
So that is who you consult with. Once you have determined who is affected and how you are going to consult with their representatives or consult with them directly it is relatively straight forward to send out the initial communications and invite representatives to be appointed so you can start the informing and consultation process itself.
The next slide then I have just put a high level steps plan of how we would normally see the information and consultation process take place and what you should see from this slide is that several communications that go out as part of this process and ideally there are several documents that can be prepared in advance. That would include the initial briefing to the employees, the invitation for the appointment of employee representatives, the letter setting out the prescribed information that you need to provide to representatives under TUPE and you can even pull together template Q&As just so that you are ready to go with that consultation and as I said already, preparation is key and so having this type of thing ready and frontloading work takes off the strain later down the line.
So what information do you actually need to give to the representatives of the affected staff or the employees. The criteria is on the slide. The information must be in writing so even if you have townhall meeting, it still needs to be followed up in writing and there is no specific that this has to be provided. Essentially, this obligation to inform the affected staff is to let them know what is being proposed, why it is being done and how it is going to affect them, and as you can see from the slide, that includes informing the employees about the measures that are envisaged by the transferor or the transferee, and equally if no measures are proposed then that should also be confirmed.
Moving on to consultation, the first point on this slide is that consultation needs to take place with a view to reaching an agreement on the measures being taken and they should be entered into with an open mind. Ultimately there is no legal requirement for an agreement to be reached on measures proposed. When do we need to be running this process? We have touched on this briefly. You have to do it long enough before the transfer to allow meaningful consultations to take place. It is quite vague but essentially you just need to do it long enough in advance or in good time to allow for it to be an effective process and how long that is going to be is dependent on the circumstances and in particular, how many people are affected, the number and extent of the measures being proposed. And I said earlier, even if there are no measures proposed and the obligation to consult doesn't bite you still should allow time in the timetable for voluntary consultations to take place.
And finally from me, I just wanted to highlight one of the stranger features of TUPE which often gets missed or confused and that is that the obligation to consult about measures is only between the transferor and its staff and the transferee and it staff so they both separate obligations towards existing staff who might be affected and to inform them and then them to consult on those measures. Now there is a separate obligation on the transferee to confirm which measures it envisages taking and confirming those measures to the transferor. So the transferor can pass on that information to the appropriate representatives but there is not actually an obligation on the transferor to consult with its employees affected by the transfer about measures proposed by the transferee. As you can imagine, that leaves a bit of void because you could have a group of staff who know that they are transferring to another employer but do not necessarily have to be consulted on what measures the new employer proposes which can lead to uncertainty amongst the workforce. What happens in practice, as it is best practice to look after employee the transferor will invite the transferee to talk to staff going over what is being proposed and for that reason, you will often see the transferor allow representatives of the transferee to attend some of the consultation meetings where the measures are being discussed and as Rebecca mentioned earlier, that usually happens where there is a relationship between the transferor and the transferee and it is more likely to occur between parties to a transaction on the business sale or on an outsourcing. It is less likely to occur on a second generation outsourcing where employees are transferring between the two suppliers. A point to take away though is that although there is not actually any obligation on the transferor to consult on the transferee's measures. The timeline still needs to allow consultations to take place and transferors will usually either facilitate that process voluntarily or do it because they are obliged to do it by the customer contract or sale agreement.
Rebecca: Thanks Jasmine. So that is the consultation process. I am now going to finish with a couple of slides on avoiding liabilities arising from the consultation process and before we do that we will have a quick look at what we are talking about in terms of the potential liability that is to be avoided.
So the headline is that the maximum award of compensation is 13 weeks gross pay per employee so essentially, it is going to be a quarter of the annual salary bill for the affected employees. You might be familiar with the cap on the calculation of a week's pay we see in some areas of employment law but I just wanted to note that that does not apply here so when we say 13 weeks gross pay we mean just that. I should say that that is the maximum amount that would be awarded where there has been a complete failure to inform and consult but the good news is that the Tribunal will work backwards from that figure if there has been some consultation but having said that the award is intended to be a penalty so the Tribunal is going to focus on the seriousness of the employer's breach rather than the actual loss that has been incurred by the employee.
The next point on the slide is also an important one which is that where the failure to consult relates to obligations on the transferor, the award will be joint and several which means that the transfer to the employees and for that reason it is usual to see agreement regarding contractual apportionment of liability between the transferor and the transferee and we are going to come on to have a look at that in just a moment. It's different where the failure arises from the transferee's obligation to notify the transferor of its measures in which case, it is the transferee who will be ordered to pay compensation provided that the transferor has won an argument that the transferee was responsible.
So now that we understand the potential risk I wanted to finish with a couple of slides looking at how we can avoid it. We learned on the last slide that liability can be joint and several and what that means in practice is that the employee needs to think about two things when it comes to avoiding liability. So the first thing is how it can minimise the risk of liability arising from its own actions and then the second time is how it can protect itself against potential liability from the other party's actions so this slide has some suggestions in respect of the first category and it might sound obvious but the best way to avoid liability is going to be to ensure that the information and consultation process is carried out correctly, and coming back to what I said at the beginning of the session in practical terms that means investing time in preparation and planning for the process to make sure that we get it right. Essentially, that means making sure that the process is structured to address all of the things that we have talked about today so allowing time for sharing of employee information, getting clarity on the measures and factoring that into the process so that sufficient time is allowed and also remembering to include time for voluntary consultation where there is no legal obligation to consult under TUPE. Although the consultation process will mainly be a matter for the transferor where there is a potential for the parties to cooperate as Jasmine said, that can really help to achieve a smooth transfer process. It is also important for the transferee to do its bit in terms of getting clarify about the measures and sharing that information at a sufficiently early stage to enable proper planning and consultant.
And the final tip that I wanted to share on this slide is to keep a document trail so at which stage of the process make sure that there are written briefings, letters and records of each meeting so that we can demonstrate that the necessary steps have been taken.
So that is how a party can protect itself from liability from its own actions and essentially that means by getting things right. Alongside that we also want to see contractual apportionment of liability and that is particularly important due to the position that we looked on joint and several liability and I have noted on this side the key contractual terms that we would usually expect to see.
So firstly, we would expect to see that liability is apportioned by way of reciprocal indemnities which ensure that the transferor is responsible for any liability which rises from its breach and on the other hand, the transferee is responsible for liability that arises from its failures.
The way in which this position is actually achieved will depend on the type of the transfer so if it is a one way transfer such as where a business is being sold then that is generally quite straightforward and in that case, the transfer agreement between the parties will include clauses which mutually apportion liability relating to the consultation process, and in that scenario the parties to the transfer are the same as the parties to the agreement so it usually just comes down to a matter of negotiation.
The drafting gets a little bit more complicated though where we are looking at a service provision change scenario and in that case, there is likely to be an onward transfer when the services agreement comes to an end so the parties need to agree contractual apportionment for the consultation process which happens both at the time of entering into the agreement and the consultation process that will happen when the agreement comes to an end and that means that the agreement needs to cater for effectively a contractual chain of indemnity making sure that where is potential for a new service provider to be involved on exit, then the apportionment of liability also covers that party.
And finally, there are a couple of other contractual protections which can also help to avoid liability in relation to this process. The first of these is a general obligation for the parties to cooperate to achieve a smooth transfer and the second is to include clauses providing for the sharing of employee information so that is all the stuff that Jasmine talked us through at the beginning of this session and that is going to be particularly relevant where there is an outsourcing agreement which will involve an onward transfer of staff at the end so in that scenario, the client is going to want clauses that enable it to obtain the critical employee information to be shared with the new employer and as we saw in Jasmine's session, that is helpful for the tender process generally but it will also mean that the new employer has the information that it needs to be able to identify any measures that it has at an early stage of the transfer process.
So that is actually everything I wanted to talk about then. I will hand back over to Siobhan now who is going to wrap things up for us.
Siobhan: Thank you very much to Rebecca. Thank you to Jasmine as well and thank you to you all for joining us today. We hope you sound the session useful.
Just a quick remainder we have our on demand webinars for the TUPE Club sessions we do on our website and there is a particular one which you might find helpful which is from March last year which is the back to basics on TUPE more generally looking at when TUPE applies and what it means.
There will also be a questionnaire that pops up at the end of this webinar and we would really appreciate if you would take some time just to fill in those few questions for us.
Our next session is in June so watch out for the invitation for that and in the meantime if you have got any TUPE questions, please do not hesitate to contact any of us or anyone else in the team here at Gowling WLG.
Thank you and goodbye.
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